Prediction Markets — Let Prediction Markets Flourish

By Adam Ozimek, Forbes, March 23, 2014

The existing evidence is positive about these markets as forecasting and information aggregation tools. But when looking at examples where these markets have underperformed we should really remember that even when Intrade was operating legally there were significant regulatory restrictions placed upon it, and most participants were operating in a gray market at best. For example, in a rule many were clearly ignoring, the CFTC technically required all participants to have assets of more than $5 million to $10 million. Another example is the popular Iowa Exchange Market, which is limited to “academic” traders who can make a maximum investment of $500.

As a result, far too much judgement of the efficacy of these markets ignores that fact that most existing data has been generated in fraught legal environments.